Milei’s choice for Argentina: From misery to prosperity

Javier Milei, Argentina’s new president and an economist, presented his free-market agenda at the World Economic Forum in Davos, Switzerland. He urged global leaders to shift away from socialist, centralized and planned economies with bloated governments and again to embrace market-driven systems and transparent governance. His country’s unending drama underscores Mr. Milei’s radical reform argument.

Argentina was once among the world’s wealthiest nations and could be again. Now its economy is only the third largest in Latin America, far behind Brazil and Mexico. Decades of socialism and centralization – by both democratic and dictatorial regimes – have ruined the country and its society. In the past 50 years, Argentina went through repeated cycles of hyperinflation (defined as when the monthly inflation rate exceeds 50 percent) that rendered it bankrupt and dependent on repeated international bailouts.

The long stretches of socialist and corrupt rule, epitomized by the Kirchner presidential dynasty of Nestor (2003-2007) and Cristina (2007-2015; vice president until 2023), finally prompted voters to opt for radical change. The country has been sinking into another financial morass: inflation reached 25 percent in January and could be headed toward 200 percent by the end of this year. The poverty rate increased to some 40 percent of the population.

Mr. Milei’s election presents a genuine scenario for reversing Argentina’s direction and restoring prosperity through economic realignment.

The Milei cure

A self-declared anarcho-capitalist, he is, in reality, a free-market advocate who champions the power of the private sector, entrepreneurial initiatives, the vital benefits of competition and a streamlined government. Argentina desperately requires this remedy despite the initial discomfort. Its cost-of-living crisis is so acute, and the state’s finances are deteriorating so rapidly that a soft, gradual reform is not feasible. Argentines have little to lose at this point besides the privileges enjoyed by entrenched top officials and their cronies.

As a first and crucial step, President Milei’s economy minister depreciated Argentina’s currency, the peso, by 50 percent, aligning its external value more closely with the market rate. The president’s agenda involves privatization of state-owned enterprises (he declared, “Everything that can be in the hands of the private sector will be in the hands of the private sector”), eliminating scores of regulations and downsizing the bloated state bureaucracy. Given the Argentine monetary system’s rampant misuse by the government for expedience and populist reasons, he aims to dissolve the compromised central bank and peg the peso to the U.S. dollar, a process known as “dollarization.”

The plan is sound, yet it defies the path that most governments, both democratic and authoritarian, are following these days. However, it is essential to remember that Mr. Milei’s economic philosophy is, in fact, credited with fostering unparalleled prosperity and a global reduction in extreme poverty and hunger over the past 70 years.

The new president, however, lacks a majority in the Argentine parliament, which may lead to dilution of the planned reform. While we support parliamentary budget controls and checks and balances on the levers of power, this situation stands the reform issue on its head. It is the parliament’s role to cut expenses and curb the administration. If it shirks this duty, Argentina’s agony will be prolonged.

Following his Davos speech, President Milei had, as the media put it, “a positive meeting” with the International Monetary Fund’s head, Kristalina Georgieva, to discuss the fate of Argentina’s embattled loan program. (The IMF extended it more than $43 billion over the last five years in repetitive bailouts.) Given the circumstances, the IMF can only favor Mr. Milei’s drastic approach.

Politically, the new leader has shifted Argentina’s stance from being somewhat pro-Chinese and pro-Russian to clear alignment with the free world and the United States. We should hope, for the sake of the 46 million people of Argentina, that the Milei presidency will bring about the necessary reforms.


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